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In a Climate of Uncertainty, Which Footwear Retailers Succeeded in 2019?

This year was defined more by what retailers in the footwear world didn’t know rather than what they did.

Tariffs and the U.S.-China trade war dominated all conversation as brands and distributors scrambled to come up with a coherent sourcing strategy for a world with and without tariffs. As it turned out, an 11th hour deal with China made sure it wasn’t a particularly dark holiday, but consumers and businesses still ended up footing a $42 billion tariff bill since the trade war started.

What’s more a “new norm” is taking over the footwear—while athleisure or sport-inspired styles had been the hot new trend, now it’s the sector’s dominant category. In October, The NPD Group predicted that sport-inspired footwear sales will overtake fashion footwear sales as early as 2021.

All things considered, the fate of footwear retailers in 2019 depended heavily on being proactive and preparing the business for a variety of outcomes. Here’s how Foot Locker, Shoe Carnival, Journeys and DSW fared.

Foot Locker

One of the premier sneaker and streetwear retailers, Foot Locker started 2019 on a high note. In March, the retailer reported FY18 was its best year of sales in the 45 years it has operated as a standalone business (140 years if you consider Foot Locker a direct descendant of the F.W. Woolworth Company). Reports emerged that Foot Locker would succeed over the next twelve months on its “undeniable relevance” to the growing sneaker world.

However, as early as the first quarter of FY19, Foot Locker stock fell on lower-than-expected comparable store sales (4.6 percent) and 9 cent earnings miss. At the time, it was thought the weakness was owed to a cold, wet start to the spring, which affected some of the retailer’s peers as well. But the hits just kept coming for Foot Locker in FY19. The second quarter saw a similar issue with earnings and an even bigger sales miss: $1.77 billion compared to expectations of $1.82 billion and comparable sales growth of just 0.8 percent.

By the time third-quarter results dropped in November, Foot Locker had lost 29 percent of its total stock value since the beginning of 2019—never mind that Q3 showed an earnings beat and healthy same-store sales.

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Foot Locker, however, still seems prepared to recover, if not thrive, in 2020. Nike has pulled its first-party products from Amazon in an effort to keep the value of its brand at a premium level and Foot Locker, a long-time Nike partner stands to benefit from the arrangement.

Shoe Carnival

It was an up-and-down year for Shoe Carnival as the retailer saw an extended skid along with a couple of record-breaking quarters in terms of revenue. In March, Shoe Carnival saw a 21 percent stock bump thanks to a solid comparable-store sales increase of 4.7 percent in its fourth-quarter.

In the first quarter of the new fiscal year, Shoe Carnival reported similar issues with the cold, wet start to the spring that became a regular feature in the retailer’s earnings reports for the quarter. At Shoe Carnival, shares fell 11 points due to a revenue miss of more than $5 million. However, the retailer said it had started to gain insight from a consumer behavior technology installed in a number of its stores in 2018. According to Cliff Sifford, company president and CEO, the technology is likely to be a sales driver over the next three to five years, and is expected to help better align its brick-and-mortar aspirations with the locations of prime Shoe Carnival customers.

In April, Shoe Carnival said it was also affected by a $24 billion tax refund shortfall that reduced consumption early in the year. However, Sifford explained, after the retailer endured another lackluster quarter in Q2, Shoe Carnival expected to rebound in August during its back-to-school sales.

Sure enough, the third quarter at Shoe Carnival saw a successful return to growth and raised expectations regarding full-year sales thanks to 3.5 percent same-store growth and a 23.7 percent increase in quarterly earnings per share.

Journeys

Genesco and its Journeys brand began the year by assuring investors the retailer would navigate new tariffs that took effect. Genesco chairman, president and CEO Rob Dennis said the footwear retailer had between 30 percent and 40 percent exposure to additional tariffs on made-in-China footwear but that it had options ready for implementation to limit this impact.

In the first quarter, it was Journeys that lead its parent company to a solid quarter due to its eighth straight quarter of positive same-store sales. As a result, Genesco stock rose by more than 12 percent following the release of its financial results. The second quarter saw much of the same, adding to Journeys’ streak of positive same-store sales.

Black Friday featured an exceptionally strong day of sales for Journeys thanks to its decision to bring forward its holiday hiring timelines in order to hire and train seasonal employees with more efficiency in 2019. This was a necessary step according to senior vice president and chief operating officer Mimi Vaughn, due to a six-day-shorter holiday shopping.

At the same time, an earnings beat and the tenth straight quarter of positive same-store sales (up 3 percent in Q3) lead Genesco to raise its full-year outlook.

DSW

At the end of 2018, DSW and ABG entered into a joint agreement to acquire the Camuto Group—which includes brands like Vince Camuto and Jessica Simpson—for $341 million. To commemorate the event, the company rebranded as Designer Brands in April.

However, DSW ended its fiscal year in March 0n a surprise loss as revenue decreased 1.8 percent in the fourth quarter, notwithstanding an additional $153 million in revenue coming from the acquisition.

Overall, 2019 was a year of transition for the retailer as it began experimenting with new concepts, including relaunching its VIP loyalty program to increase brand engagement, retention rates and average transactions per member. DSW even dipped its toe into the CBD trend, announcing it would begin selling Seventh Sense body lotions, foot creams and muscle balms containing the cannabis compound at select locations.

Still, DSW was unable to end the year on a high note, as its stock fell by more than 18 percent in December after its Q3 earnings report revealed falling margins and an earnings miss. The retailer said this was a result of increased promotion and decreased marketing in reaction to tariff headwinds. According to the financial report, the retailer was heavily affected by a consumer pullback that resulted from reduced marketing during the year.